Now that our daughter gets a weekly allowance, the most common verb that comes out of her mouth is BUY.
Daddy, I’m going to BUY (insert latest craze that all the kids have) with my allowance. (Insert friend’s name) has 5 and they’re soooooo cute. Don’t you think they’re cute, Daddy?
Um, yeah, I guess so. Actually, it looks a bit like a couple of toys you already have. I bet they were made in the same factory. They have the same colourful, fuzzy hair, but their face has just been squished up a bit and they’ve been repackaged. Great marketing strategy, isn’t it?
Daddyyyyyyyyyyyyyy! Stop it!
Yes, deciding to dole out the allowance was the easy part.
The hard part is teaching her how to deal with all the newfound cash.
There are Two Sides to the Income Statement
And I have to admit that she has a good point.
However, I think that we would be grossly negligent as parents if we only addressed the income side of the equation.
Too many adults go through their whole life not paying attention to the outflows, and their personal financial situations usually suffer dearly because of it. If we want our children to learn to be responsible with money – a skill they will carry with them into adulthood – then we need to start teaching them as soon as they have some of it to spend.
Yes, there will be plenty of worthy items that the kids want to purchase that we will have no problems with: books, art supplies, toys that foster creative thinking, etc.
There will even be the odd impulse purchase of something fun or funky.
But there will also be items that our kids will want to buy that are, quite frankly, garbage that will end up as landfill sooner rather than later.
So how can we convince them that they don’t need these things without them feeling like we are telling them how to spend their money?
1. Ask Questions. A Lot of Questions.
First and foremost, we have to undertake the game of persuasion. This is a game that any good salesperson or negotiator spends years perfecting.
But we don’t have years to wait. We have to learn how to do this NOW!
The good news is that it really comes down to this: ask questions.
A lot of them.
This will help your kids come to their own realization that what they think they need isn’t really necessary.
Or, it will help them decide that it really is worth spending their money on.
Here are some of my favourites:
- Why do you want to buy one of those?
- What are you going to do with it?
- What do you already have that is quite similar?
- What are you going to do with the other similar items you already have?
- What makes this item so unique that you need to spend your money on it rather than on something else?
- How long do you think you will be happy with it before you want yet another similar item?
- Can you think of an experience or future need that might be a better way to spend your money?
- Can’t you just borrow one of your friend’s 5 different iterations of the item and play together with them?
- If you buy the item, where will it end up after you are bored with it? (follow up with environmental guilt-trip)
I’m sure you can think of dozens more. If nothing else, it will get your kid thinking a bit.
However, they may still want something that you really feel is a waste of money. At this point it is time to employ some stalling tactics.
2. Make Them Wait
Make them wait a few weeks. Or months. 😆
This is a great tactic that I personally employ with my own money when I think I need something. I make myself wait a while and, more often than not, I realize I didn’t need that thing in the first place and never end up buying it.
So make them wait.
Don’t take them shopping with you. Tell them outright that they should wait a month and see if they still want it. Chances are there will be a new craze by then.
3. Be A Good Role Model
We also have more direct talks with our daughter about the vicious cycle of always wanting more.
We constantly discuss the virtue of being happy with what you have. We practice what we preach by modelling good spending habits. We don’t come home with the latest gadget every time we go shopping. We DON’T GO SHOPPING unless absolutely necessary.
Kids can see your habits from a mile away and will develop the same. You are their mentor!
4. Practice Asset Allocation
Good money managers all know the importance of strategic asset allocation, so why not teach it to your kids?
A soon as our daughter got her first allowance, we discussed the difference between short term cash and long-term savings and created a separate “account” for each.
Every week when she gets her allowance, she puts 25% of it into long-term savings – an account she may not touch for years.
Yes, this isn’t quite as much as her parents put aside, but our hope is that she will slowly work up to that as she starts seeing the benefits of her growing nest-egg.
At 8 years old, she still has plenty of time.
Some people also like their kids to have a “charity” account. However, we find that two accounts keeps it simple, and when opportunities to give arise, she can use the short-term account to make a donation.
I think that she will “feel” the “giving” more this way, seeing a good portion of her weekly allowance go to a good cause.
5. Just Say No
If all else fails and you feel really strongly about something, just say NO!
That’s what I did with the toy with the scrunched up face.
Oh yeah, she was upset with me for a day or two and kept mentioning it for a week or so.
But funnily enough about a month later she just came out one day and said,
“Daddy, I don’t think I want one of those any more. I want an (insert new craze that all her friends have) instead.”
I had about a millisecond to feel smug.
But just a millisecond before I pressed the repeat button.
“Why do you want to buy one of those?”
How about you? Do you have any suggestions for teaching our kids how to spend wisely? Share your wisdom with our community by posting in the comments box below.